- Pound (GBP) is flat on General Election day
- Labour is expected to win the election
- Euro (EUR) is unchanged German factory orders fall
- ECB meeting minutes will be released shortly
The Pound Euro (GBP/EUR) exchange rate is falling after two days of gains. The pair rose 0.08% in the previous day, settling on Wednesday at €1.1811 and trading in a range between €1.1793 and €1.1836. At 11:00 UTC, GBP/EUR trades -0.03% at €1.1808.
The pound is holding steady as the UK heads to the polls to vote in the general election.
Labour, the opposition party, is widely expected to win the national election, resulting in a change of government. Opinion polls show Keir Starmer’s centre-left party is on course for a landslide victory over Prime Minister Rishi Sunak’s Conservatives, who have led the country for the past 14 years.
Labour’s manifesto suggests that it will increase spending by around £9 billion, funded by £9 million billion in tax raises. However, this is modest in the context of a £3 trillion-pound UK economy.
As a result, and with the information we have so far, the change of government is not expected to have a dramatic impact on the UK fiscal position. Therefore, the Bank of England is unlikely to change its outlook for growth, inflation, and interest rates. However, more will be known when Labour reveals its autumn budget later this year.
The pound could receive a boost from optimism about more stability, particularly in a global context, compared to other countries that are also heading to the polls this year.
That said, an extreme result and a large majority for Labour could allow the new government to make virtually unopposed decisions, potentially adding to the UK debt or stifling the economy. Those sorts of changes could rattle the pound.
Meanwhile, the euro is holding steady despite weaker-than-expected German factory orders and ahead of the release of the ECB minutes from the June meeting.
German factory orders fell 1.6% month over month in May, defying expectations of a 0.5% increase. This indicates that the key sector for the country’s economy continues to struggle.
Attention will now turn to the minutes from the June ECB meeting, at which the central bank cut rates by 25 basis points.
